ARKANSAS OIL AND GAS COMMISSION
2215 WEST HILLSBORO
P.O. BOX 1472
EL DORADO, ARKANSAS 71731-1472
ORDER NO. 465-2007-10
November 02, 2007
General Rule B-43 Well Spacing Area
White County, Arkansas
INTEGRATION OF A DRILLING UNIT
After due notice and public hearing in El Dorado, Arkansas, on October 23, 2007 ,
the Arkansas Oil and Gas Commission, in order to prevent waste, carry out an
orderly program of development and protect the correlative rights of each owner
in the common source(s) of supply in this drilling unit, has found the following facts
and issued the following Order.
STATEMENT OF THE CASE
Edge Petroleum Corporation (the “Applicant”) filed its application for an Order
pooling and integrating the unleased mineral interest(s) and/or uncommitted
leasehold working interest(s) of certain parties named therein who have failed to
voluntarily integrate their interest(s) for the development of the unit comprising of
Section 12, Township 8 North, Range 10 West, White County, Arkansas.
The Applicant presented proof that they had attempted unsuccessfully to acquire
voluntary leases and/or other agreements for consideration or on terms equal to
that otherwise offered and paid for similar leases or leasehold interest(s) in this
drilling unit.
At the request of the Applicant, the following parties were dismissed by the
Commission, regardless of whether the party or parties are listed as unleased
mineral interest(s) or uncommitted leasehold working interest(s) to be integrated:
NONE
FINDINGS OF FACT
From the evidence introduced at said hearing, the Commission finds:
1. That the Applicant has proposed to drill a well within a drilling unit (Unit) that
the Commission has previously established, consisting of Section 12, Township
8 North, Range 10 West, White County, Arkansas containing 640 acres, more
or less.
2. The Applicant plans to drill such well (the “initial well”) to test the Fayetteville
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November 02, 2007
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Shale Formation and any intervening formations for the production of
hydrocarbons.
3. The requested Model Form Joint Operating Agreement employed by the
Applicant and proposed to the owners set out in Finding Nos. 5 and 6 (if any)
below, is in the form of A.A.P.L. Form 610-1982 Model Form Operating
Agreement (JOA), completed, amended, and modified as adopted by the
Commission on October 24, 2006.
4. The requested one-year term oil and gas lease (Lease) employed by the
Applicant is in the form of Exhibit "B" of the JOA.
5. The unleased mineral interest(s) to be integrated are:
None.
and any unknown spouse, heir, devisee, personal representative, successor
or assigns of said owners of unleased interests.
6. The uncommitted leasehold working interest(s) to be integrated are:
T.S. Dudley Land Company, Inc.; Aspect Abundant Shale, L.P.;
Chesapeake Energy Corporation; SEECO, Inc.;
and any unknown spouse, heir, devisee, personal representative, successor
or assigns of said owners of uncommitted leasehold interests.
7. The Applicant requests that any parties listed in Findings Nos. 5 and/or 6
(unless dismissed at the request of the Applicant in the Statement of the Case
above) be integrated.
8. The alternatives for integrated parties are:
A.
Unleased Mineral Interest(s) Alternatives:
Not Applicable.
B.
Uncommitted Leasehold Working Interest(s) Alternatives:
1. Participate in the well
Participate by paying their proportionate share in the costs of
drilling, completing, equipping and operating the initial well,
subject to the terms of the JOA, and that each such owner
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November 02, 2007
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thereafter be bound by the terms of such JOA (whether or not
such owner actually executes such agreement), including for
purposes of subsequent operations, for so long as there is
production of hydrocarbons from within the Unit; or
2.
Elect “Non-Consent”
Not participate and become a “Non-Consenting Party” under the
JOA with respect to the initial well, and be subject to all of the
non-consent provisions thereunder, until the proceeds realized
from the sale of hydrocarbons allocable to the mineral interest
subject to said parties’ leasehold interest(s) in the initial well,
exclusive of reasonable leasehold royalty, shall equal the total
recoupment amount described in subparagraphs (a) and (b) of
Article VI.B.2 of the JOA, with the non-consent penalty under
Article VI.B.2(b) being 400% for the initial well, and/or 400% for
each subsequent well drilled on the Unit; or
3.
Failure to Make an Election
Uncommitted leasehold working interest(s) owners who fail to
timely elect either alternative shall be deemed to have elected
Alternative (B2), above.
9. Applicant requests that all parties listed in Finding Nos. 5 and/or 6 (unless
dismissed at the request of the Applicant in the Statement of the Case
above) be required to elect within fifteen (15) days after the effective date
of the Order, unless, for cause shown, a shorter or longer period is approved.
ALL INTEGRATED PARTIES SHALL NOTIFY EDGE PETROLEUM CORPORATION, 1301
TRAVIS, SUITE 2000 HOUSTON, TX 77002, IN WRITING, OF THE ALTERNATIVE
ELECTED.
10. That the Applicant should be designated to be the operator of the Unit
described above.
11. That no objections were filed.
CONCLUSIONS OF LAW
1. That due notice of public hearing was given as required by law and that this
Commission has jurisdiction over said parties and the matter herein
considered.
2. That the land described in Finding No. 1 has been previously established as a
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drilling unit.
3. That this Commission has authority to grant said application and force pool
and integrate the unleased mineral interest(s) and uncommitted leasehold
working interest(s) of said parties under the provisions of Act No. 105 of 1939,
as amended.
ORDER
Now, therefore, it is Ordered that:
1.
INTEGRATION
All of the unleased mineral interest(s) and/or uncommitted leasehold working
interest(s) described in Finding Nos. 5 and/or 6 (unless dismissed at the
request of the Applicant in the Statement of the Case above) within the Unit
described in Finding No. 1 be and are hereby integrated into one unit for
drilling and production purposes.
2.
ALLOCATION OF PRODUCTION
The hydrocarbons that are produced and saved from the well or wells
assigned to the above described Unit shall be allocated to each separately
owned tract embraced therein in the proportion that the acreage of such
tract bears to the total acreage in the Unit and shall be considered as if
produced from each such tract.
3.
OPERATOR TO CHARGE COSTS
The designated operator of the Unit shall have the right to charge to each
participating party its proportionate share of the actual expenditures
required for the costs of developing and operating the well in the manner set
forth in Exhibit “C” of the JOA.
4.
ELECTION OF ALTERNATIVES
The owners of the unleased mineral and/or uncommitted leasehold working
interests designated in Finding Nos. 5 and/or 6 above (unless dismissed at the
request of the Applicant in the Statement of the Case above), in the
aforementioned Unit shall have fifteen (15) days from the effective date of
this order (the “Election Period”) to elect one of the alternatives as described
in Finding No 8 above. If no such election is made within the Election Period,
the owners of unleased mineral interest(s) shall be deemed to have elected
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November 02, 2007
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under Alternative A4 and uncommitted leasehold working interest(s) owners
shall be deemed to have elected under Alternative B3, as described in
Finding No 8. Any party choosing to participate or go non-consent or, who by
the terms of this Order are deemed non-consent, shall be subject to the
election period set forth in the JOA with respect to all subsequent wells drilled
on the Unit.
5.
RECEIPT OF VALUE OF PRODUCTION
A.
Unleased Mineral Interest Owner(s)
Not Applicable.
B.
Uncommitted Leasehold Working Interest Owner(s)
In the event an uncommitted leasehold working interest owner under
one or more valid lease(s) elects Alternative No. B2 (Non-Consent)
described in Finding No. 8 above, the Consenting Parties shall have the
right to receive the hydrocarbon production which would otherwise be
delivered or paid to such uncommitted leasehold working interest
owner under such lease(s) until such time as the proceeds realized from
the sale of such production equals the total recoupment amount
described in Finding No. 8B2 above.
The leasehold royalty payable during the recoupment period shall be
calculated on the basis of the rate or rates provided in each of the
leases creating the rights temporarily transferred pending recoupment.
6.
SUBDIVISION OF TRACT ALLOCATION
The revenue realized by the Consenting Parties from the sale of
hydrocarbons shall be allocated among the separately owned tracts within
the integrated unit and, pending recoupment of the costs and additional
sum described at Paragraph No. 5 of this Order, shall be paid to the
integrated parties as follows:
A.
Unleased Mineral Interest Owner(s)
Not Applicable.
B.
Uncommitted Leasehold Working Interest Owner(s)
Leasehold royalty shall be paid according to the provisions of the valid
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lease(s) existing for each separately owned tract, except where the
Commission finds that such lease(s) provide for an excessive,
unreasonably high, rate of royalty, as compared with the royalty
determined by the Commission to be reasonable and consistent with
the royalty negotiated for lease(s) made at arm's length in the general
area where the Unit is located, in which case the royalty stipulated in
the second paragraph of Paragraph 5B of this Order shall be payable
with respect to such lease(s).
7.
RECORDS OF UNIT OPERATION
The designated Operator shall, upon request and at least monthly, furnish to
the other parties any and all information pertaining to wells drilled,
production secured and hydrocarbons marketed from the Unit. The books,
records and vouchers relating to the operation of the Unit shall be kept open
to the non-operators for inspection at reasonable times.
8.
PAYMENT FOR PRODUCTION
During the period of recoupment, the revenue allocable to those owners of
the integrated unleased mineral interest(s) who elect Alternative No. A3
(Non-Consent) and to the mineral interest(s) subject to and covered by the
integrated uncommitted leasehold working interest(s) whose owners elect or
shall be deemed to have elected Alternative No. B2 (Non-Consent), both
described in Finding No. 8 above (collectively, the “non-consent interests”),
shall be paid to those Consenting Parties that elect to acquire their
proportionate share of such non-consent interests pursuant to Paragraph 9 of
this Order.
9.
SHARING OF NON-CONSENT INTERESTS
The designated Operator shall offer each Consenting Party in the
initial well who executes the JOA, or who elects to participate under
this Order, prior to the expiration of the Election Period an opportunity
to acquire its proportionate share of all non-consent interests in the
initial well pursuant to the terms of Article VI.B.2. of the JOA.
10.
UNIT OPERATION
The Unit described above shall be operated in accordance with the terms
of the JOA and existing rules and regulations and any amendments
thereto, of the Arkansas Oil and Gas Commission.
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11.
DESIGNATED OPERATOR
The Applicant is hereby designated as operator of and authorized to
operate the Unit described above.
12.
SIGNED JOA
The Applicant shall provide all parties, except those parties who elect to
lease under Alternative A1 or who are deemed to have elected under
Alternative A4, both described in Finding No. 8 above, with signed copies
of the JOA as adopted by the Commission which shall include an Exhibit
“A” showing a before payout and after payout decimal interest for the
effected parties, within 30 days from the end of the election period.
This Order shall be effective from and after November 02, 2007; and the
Commission shall have continuing jurisdiction for the purposes of enforcement,
and/or modifications or amendments to the provisions of this Order. This Order will
automatically terminate under any of the following conditions: well drilling
operations have not been commenced within one year after the effective date; or
one year following cessation of drilling operations if no production is established; or,
within one year from the cessation of production from the unit hereby created.
ARKANSAS OIL AND GAS COMMISSION
Lawrence E. Bengal
Director of
Production and Conservation
It is so Ordered by the Commission:
Chad White, Chairman
W. Frank Morledge, Vice-Chairman
Charles Wohlford
Mike Davis
Kenneth Williams
Carolyn Pollan
William L. Dawkins, Jr.
Jerry Langley
The following Commissioner(s)were voluntarily disqualified:
Bill Poynter